The SEP and SIMPLE were created specifically for businesses with fewer than 100 employees — giving you a way to offer meaningful retirement benefits without the complexity and cost of a traditional 401(k).
Both plans carry the same qualified tax treatment as larger plans — pre-tax contributions, tax-deferred growth — but are far easier to administer and designed to be straightforward for your employees to use.
A 401(k) can be powerful — but for most businesses under 100 employees, a SEP or SIMPLE delivers the same qualified tax treatment with far less cost and paperwork.
Qualified plan tax treatment — same as a 401(k).
As qualified retirement plans, SEPs and SIMPLEs enjoy identical tax treatment. Employer and employee contributions are tax-deductible or made on a pre-tax basis. Growth inside the accounts is tax-deferred. Withdrawals are taxed as ordinary income. Early withdrawals before age 59½ may be subject to a penalty.
A SEP is easy to set up and even easier to administer. The employer contributes to each employee's individual SEP-IRA — there is no complex plan document, no annual filing, and no forfeiture provisions to manage.
The employer's only obligation is making the contribution by their tax filing deadline. No plan administration, no forfeitures to manage.
No contribution is required every year. When one is made, it must go to all eligible employees (age 21+, part-time included) based on 25% of covered compensation.
Each employee manages their own account, which can be invested in mutual funds, money market funds, or fixed investments. Funds are 100% immediately vested.
Employer contributions are tax-deductible. Growth inside the account is tax-deferred until withdrawal, at which point it is taxed as ordinary income.
Key Characteristics
The employer's only obligation is making the contribution by their tax filing deadline. That is it.
Contribution limits are adjusted periodically by the IRS. Figures shown are approximate and for illustrative purposes. Contact us for current limits and plan-specific guidance.
These are the questions small business owners ask us most when evaluating retirement plan options. Have another? We are happy to answer it directly.
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We will walk through which plan structure best fits your business, your employees, and your goals — and help you get it set up correctly from the start.
